Mark Thompson is turning Concordia Healthcare into an M&A machine in pharmaceuticals.
Mark Thompson has Concordia Healthcare on the verge of something big
Mark Thompson is not a doctor. He’s not even a pharmacist. Indeed, he didn’t know anything about the health-care industry when he entered it in 2001 after a headhunter came looking for someone to do in-house legal work for Biovail Corp. But investors can be forgiven if they feel this lawyer turned budding pharma magnate has the right prescription for success. Thompson founded Concordia Healthcare Corp. in December 2012 and took it public a year later. Since then, its stock has grown 1,264%, from around $7.50 to more than $90 as of mid-September, a week after he pulled off the biggest deal in Concordia’s short existence: a US$3.5-billion stock-and-cash deal for Amdipharm Mercury Ltd., otherwise better know as AMCo, a London-based multinational pharma with well over 100 products and a geographical reach into more than 100 countries.
It’s the kind of bold deal investors have been waiting for from what one analyst referred to as a baby version of Valeant Pharmaceuticals International Inc., which has grown into one of Canada’s biggest companies by market cap by making a seemingly neverending series of acquisitions. Such comparisons often rankle execs at the smaller company, but Thompson doesn’t shy away from them. “It doesn’t bug me. Mike Pearson has done an amazing job of growing Valeant,” he says. “The opportunity size that moves our needle is still very much smaller than what would move Valeant’s needle. We have some development work ongoing, but so does Valeant, so there really aren’t a huge amount of differences between what the organizations do.”
Nevertheless, the AMCo deal wouldn’t have even happened six months ago. The math, Thompson says, simply wouldn’t have worked. But that was before he pulled the trigger on a smaller deal, buying 18 products from Covis Pharma SARL and Covis Injectables SARL for US$1.2 billion. He will soon have his sights on even bigger fish. “Pre-Covis, we couldn’t have done this deal. After Covis, we can do this deal,” he says. “Now after this deal closes, we could do something that is larger than this transaction, once we get to this place where we can financially achieve that.”
That said, the AMCo deal will transform Concordia from a regional player to a global entity. Concordia started with three products and sold them only in the U.S. Once the deal closes, it will have
more than 200 products and be able to sell them — and any others it acquires — into over 100 countries. It also gets a “centre of excellence” in India that has 200 employees doing back-office work such as regulatory paperwork, supply chain and finance, much of it the type of work that Concordia currently outsources. “We’ll have this global machine that we can drop more products into on a very seamless basis,” he says. “It really opens up the world for new and interesting deals. The amount of inbound stuff we get now is more than we have ever had.”
It’s a long way from the Hill where Thompson worked after graduating with a law degree from the University of Ottawa. He then worked for a couple of years at Osler, Hoskin & Harcourt LLP, where he realized practising law was not something he wanted to do, and then a couple of years doing business development at Imax Corp., where he realized that the punishing travel schedule he was on wasn’t good for a father of three young children. Fortuitously, that’s when Biovail’s headhunter came calling. “I knew nothing about the industry at that point, and that was at the start of 2001,” he says. “I didn’t know anything about Biovail either when I went there.”
But he figured that health care was recession proof, and that idea has held up to this day. Although pharma valuations are soaring, particularly in Canada where investors plow into the sector as they flee energy and resources, Thompson isn’t too worried about a possible reversal if those two sectors rebound. He admits it can be frustrating to watch his stock swing because of headwinds caused by the slumping resource sectors, but says health care typically performs well because medicine is at the top of people’s hierarchy of needs. And, for the most part, the expenses to create Concordia’s drugs have already long since passed, so the company is in the collection phase of those drugs’ lifecycles, which can be extended ones.
“Old products that work continue to be prescribed for a long, long time,” Thompson says. “Donnatal, which is still our biggest product, was approved in 1936 and there are still 400,000 prescriptions written in the U.S. every year for that product. The reason for that is it works.” Much like his M&A strategy so far.